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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-QSB

[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934. 
       For the quarterly period ended: December
31, 2004

OR

[_] Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934. 
      For the transition period from: to

Commission File Number: 000-030813

AlphaRx, Inc.(Name of Small Business Issuer in its Charter)

Delaware
      98-0177440(State or other jurisdiction of
      (I.R.S.
      Employer Identification No.)incorporation or organization)


168 Konrad Crescent, Suite 200 Markham, Ontario, Canada L3R 9T9(Address of principal executive offices)

Registrant's telephone number, including area
code: (905) 479-3245

Securities registered pursuant to Section 12(b)
of the Act: None

Securities registered pursuant to Section 12(g)
of the Act: 
Common Stock, $.0001 par value 
(Title of Class)

Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

The number of outstanding shares of registrant's Common Stock
on February 11, 2005 was 57,508,112.

Transitional Small Business Disclosure Format. Yes [ ] No [X]

1

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ALPHARX, INC.

FORM 10-QSB

DECEMBER 31, 2004

TABLE OF CONTENTS

|Unaudited Interim
    Consolidated Balance Sheets as of December 31, 2004        |   
|-------------------------------------------------------------------------------- | --
|and September 30, 2004                                                           | 3 
|                                                                                 |   
|Unaudited Interim
    Consolidated Statements of Operations for the three months |   
|ended December 31, 2004 and December 31, 2003                                    | 4 
|                                                                                 |   
|Unaudited Interim
    Consolidated Statements of Changes in Shareholders' Equity |   
|(Deficiency)                                                                     | 5 
|                                                                                 |   
|Unaudited Interim
    Consolidated Statements of Cash Flow for the three months  |   
|ended December 31, 2004 and December 31, 2003                                    | 6 
|                                                                                 |   
|Condensed Notes to
    Unaudited Interim Consolidated Financial Statements       | 7 
|                                                                                 |   
|Management's
    Discussion and Analysis of Financial Condition and Plan         | 12
|of Operation                                                                     |   
|                                                                                 |   
|Other Information                                                                | 16

2

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ALPHARx, INC. 
INTERIM CONSOLIDATED BALANCE SHEETS 
AS AT DECEMBER 31, 2004 AND SEPTEMBER 30,2004 
(UNAUDITED)

|                                                    | December 31, | September 30,
|--------------------------------------------------- | ------------ | -------------
|                                                    |              | 2004         
|CURRENT ASSETS                                      |              |              
|                                                    |              |              
|Cash and Cash Equivalents                           | $            | 2,270,008    
|Accounts Receivable, net                            |              | 50,783       
|Prepaid Expenses                                    |              | 50,797       
|Inventory                                           |              | 239,845      
|                                                    |              |              
|TOTAL CURRENT ASSETS                                |              | 2,611,433    
|                                                    |              |              
|                                                    |              |              
|PROPERTY, PLANT &
    EQUIPMENT, net                |              | 256,431      
|OTHER ASSETS                                        |              |              
|Licensing Right (Note 3)                            |              | 1            
|                                                    |              |              
|TOTAL ASSETS                                        |              | 2,867,865    
|                                                    |              |              
|CURRENT LIABILITIES                                 |              |              
|Accounts Payable and Accrued Liabilities            |              | 350,344      
|Notes Payable (Note 4)                              |              | -            
|Litigation Liabilities (Note 5 )                    |              | 25,000       
|TOTAL CURRENT LIABILITIES                           |              | 375,344      
|                                                    |              |              
|                                                    |              |              
|SHAREHOLDERS' EQUITY                                |              |              
|Common Stock: $ 0.0001
    par value,               |              |              
|Authorized 250,000,000 shares; issued and           |              |              
|outstanding 57,508,112 shares (September 30, 2004 - |              |              
|52,304,642)                                         |              | 5,752        
|Additional paid-in capital                          |              | 8,930,023    
|Deficit                                             |              | (6,443,254)  
|                                                    |              |              
|TOTAL SHAREHOLDERS'
    EQUITY                      |              | 2,492,521    
|                                                    |              |              
|TOTAL LIABILITIES AND
    SHAREHOLDERS' EQUITY      | $            | 2,867,865    

See condensed notes to consolidated financial statements

3

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ALPHARx, INC. 
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS 
FOR THE THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003 
(UNAUDITED)

|Three months ended
    December 31,     |   | 2004        |   | 2003       
|--------------------------------------- | - | ----------- | - | -----------
|                                        |   |             |   |            
|SALES                                   | $ | 8,946       | $ | 47,169     
|                                        |   |             |   |            
|COST OF SALES                           |   | 4,428       |   | 17,516     
|                                        |   |             |   |            
|GROSS MARGIN                            |   | 4,518       |   | 29,653     
|                                        |   |             |   |            
|                                        |   |             |   |            
|SELLING AND
    ADMINISTRATIVE EXPENSES |   | 293,316     |   | 270,917    
|RESEARCH AND
    DEVELOPMENT EXPENSES   |   | 154,012     |   | 11,428     
|DEPRECIATION                            |   | 11,450      |   | 11,044     
|LOSS FROM OPERATIONS                    |   | (454,260)   |   | (263,736)  
|                                        |   |             |   |            
|OTHER INCOME AND
    EXPENSES           |   |             |   |            
|                                        |   |             |   |            
|Interest Income                         |   | 9,826       |   | -          
|                                        |   |             |   |            
|                                        |   |             |   |            
|LOSS BEFORE INCOME TAXES                |   | (444,434)   |   | (263,736)  
|                                        |   |             |   |            
|INCOME TAX                              |   | -           |   | -          
|                                        |   |             |   |            
|NET LOSS                                |   | $ (444,434) |   | $ (263,736)
|                                        |   |             |   |            
|NET LOSS PER COMMON
    SHARE, BASIC &  |   |             |   |            
|DILUTED                                 |   | (0.01)      |   | (0.02)     
|                                        |   |             |   |            
|WEIGHTED AVERAGE
    NUMBER OF COMMON   |   |             |   |            
|SHARES OUTSTANDING                      |   | 56,490,117  |   | 16,968,995 

See condensed notes to consolidated financial statements

4

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ALPHARx, INC. 
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 
(UNAUDITED)

|                     | Common Stock | Additional | Retained   | Total        
|-------------------- | ------------ | ---------- | ---------- | -------------
|Number of            |              | Paid-in    | Earnings   | Shareholders'
|                     | Shares       | Amount     | Capital    | (Deficit)    
|                     |              |            |            |              
|                     |              |            |            |              
|Balance at           |              |            |            |              
|September 30,        |              |            |            |              
|2003                 | 16,920,082   | 1,692      | 4,024,039  | (4,225,980)  
|                     |              |            |            |              
|Issuances of         |              |            |            |              
|Common Stock         |              |            |            |              
|for consulting,      |              |            |            |              
|legal services       | 100,000      | 11         | 29,990     |              
|                     |              |            |            |              
|Conversion of        |              |            |            |              
|Promissory           |              |            |            |              
|Notes                | 3,752,340    | 375        | 374,859    |              
|                     |              |            |            |              
|Commission on        |              |            |            |              
|Promissory
    Notes |              |            |            |              
|and Common           |              |            |            |              
|Stock Issued         | 4,308,186    | 431        | 580,120    |              
|                     |              |            |            |              
|Issuances of         |              |            |            |              
|Common               |              |            |            |              
|Stock                | 27,224,034   | 2,723      | 3,410,027  |              
|                     |              |            |            |              
|Net Loss
    for the |              |            |            |              
|Year ending          |              |            |            |              
|September 30,        |              |            |            |              
|2004                 |              |            |            | (1,772,840)  
|                     |              |            |            |              
|Balance at           |              |            |            |              
|September 30,        |              |            |            |              
|2004                 | 52,304,642   | $5,232     | $8,419,035 | $(5,998,820) 
|                     |              |            |            |              
|Conversion of        |              |            |            |              
|Promissory           |              |            |            |              
|Notes                | 5,203,470    | 520        | 510,988    |              
|                     |              |            |            |              
|Net loss for         |              |            |            |              
|the period           |              |            |            | (444,434)    
|                     |              |            |            |              
|Balance at           |              |            |            |              
|December 31,         |              |            |            |              
|2004                 | 57,508,112   | $5,752     | $8,930,023 | $(6,443,254) 

See condensed notes to consolidated financial statements

5

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ALPHARx, INC. 
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS 
FOR THE THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003 
(UNAUDITED)

|Three months ended
    December 31,                             |   | 2004      |   | 2003     
|--------------------------------------------------------------- | - | --------- | - | ---------
|                                                                |   |           |   |          
|CASH FLOWS FROM
    OPERATING ACTIVITIES                        |   |           |   |          
|Net Loss                                                        | $ | (444,434) | $ | (263,736)
|Adjustments to reconcile net loss to net cash used in operating |   |           |   |          
|activities:                                                     |   |           |   |          
|Depreciation and amortization                                   |   | 11,450    |   | 11,044   
|Shares Issued For Services Rendered                             |   | -         |   | 30,000   
|Changes in assets and liabilities:                              |   |           |   |          
|(Increase) decrease in Inventory                                |   | (59,573)  |   | 2,598    
|(Increase) decrease in Accounts Receivable                      |   | (853)     |   | 1,183    
|(Increase) decrease in Prepaid Expenses                         |   | 16,843    |   | (5,656)  
|Increase in Accounts Payable and Accrued Liabilities            |   | 71,273    |   | 99,758   
|                                                                |   |           |   |          
|NET CASH USED IN
    OPERATING ACTIVITIES                       |   | (405,294) |   | (124,809)
|                                                                |   |           |   |          
|CASH FLOWS FROM
    INVESTING ACTIVITIES                        |   |           |   |          
|                                                                |   |           |   |          
|Purchase of Machinery & Equipment                               |   | (26,348)  |   | (23,239) 
|                                                                |   |           |   |          
|NET CASH USED IN
    INVESTING ACTIVITIES                       |   | (26,348)  |   | (23,239) 
|                                                                |   |           |   |          
|CASH FLOWS FROM
    FINANCING ACTIVITIES                        |   |           |   |          
|Increase in bank indebtedness                                   |   | -         |   | 23,198   
|Issuance (repayment) of Notes Payable                           |   | (665,900) |   | 100,706  
|Proceeds from Issuance of Common Stock (net)                    |   | 511,508   |   | -        
|                                                                |   |           |   |          
|NET CASH PROVIDED BY
    (USED IN) FINANCING ACTIVITIES         |   | (154,392) |   | 123,904  
|                                                                |   |           |   |          
|NET DECREASE IN CASH                                            |   | (586,034) |   | (24,144) 
|                                                                |   |           |   |          
|CASH, and cash
    equivalents, beginning of period             |   | 2,856,042 |   | 24,520   
|                                                                |   |           |   |          
|CASH, and cash
    equivalents, end of period                   | $ | 2,270,008 | $ | 376      
|                                                                |   |           |   |          
|                                                                |   |           |   |          
|Income Tax Paid                                                 | $ | 0         | $ | 0        
|Interest Paid                                                   | $ | 0         | $ | 0        

See condensed notes to consolidated financial statements

6

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ALPHARX INC. 
CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 
DECEMBER 31, 2004 
(UNAUDITED)

NOTE 1. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions to Form 10-QSB and do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of all recurring accruals) considered
necessary for fair presentation have been included. Operating results for the
interim periods are not necessarily indicative of the results that may be
expected for the year ended September 30, 2005. Interim financial statements
should be read in conjunction with the Company's annual audited financial
statements.

NOTE 2. NATURE OF BUSINESS AND GOING CONCERN

ALPHARX, INC. (the Company) was incorporated under the laws
of the State of Delaware on August 7, 1997. The company is an emerging
pharmaceutical company specializing in the formulation of therapeutic products
using proprietary drug delivery technologies. The company was formally known as
LOGIC TECH INTERNATIONAL, INC., and had its corporate name changed during the
fiscal year of 2000.

Effective July 1, 2003 the Company acquired all of the shares
of AlphaRx Canada Limited for nominal value of $1. AlphaRx Canada Limited was
dormant until this time. AlphaRx Canada Limited was incorporated under the laws
of Ontario in order to streamline sales of the Company's products in the
Canadian market. Prior to this time AlphaRx Canada Limited had no material
assets or any liabilities and was wholly owned by the President & CEO of the
Company. The consolidated financial statements reflect the activities of the
Company and of AlphaRx Canada Limited - its wholly owned subsidiary. All
material inter-company accounts and transactions have been eliminated.

The accompanying unaudited consolidated financial statements
have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
Accordingly, they do not include any adjustments relating to the realization of
the carrying value of assets or the amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going
concern. Continuance of the Company as a going concern is dependent on its
future profitability and on the on-going support of its shareholders, affiliates
and creditors.

NOTE 3. LICENSING RIGHTS

The Company acquired world-wide exclusive commercialization rights for VT-1
from Select Therapeutics Inc. in January 2003 with the intention of
commercializing this drug. Subsequent to this acquisition the Company launched
Flexogan in Canada, and shifted focus on drug delivery products, and related
sales and marketing. Having unsuccessfully attempted to resell these
commercialization rights, they have been written down to a nominal value due
primarily to prohibitive development costs, and the fact that there is no market
for these rights.

NOTE 4. NOTES PAYABLE

During October, 2004, the Company converted $520,347 in convertible
promissory notes into 5,203,470 shares of common stock plus warrants to purchase
10,406,940 shares of common stock at an exercise price of $0.30 per share. These
warrants expire during September and October, 2007.

7

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The remainder of the promissory notes totaling $145,553 as at September 30,
2004, were repaid to officers and directors of the Company. As a result of the
repayments and conversions, the Company has no convertible notes or promissory
notes outstanding as of December 31, 2004.

NOTE 5. LITIGATION LIABILITY

The Company is a defendant in a lawsuit filed by a prospective investor
alleging breach of contract, which seeks damages totalling $25,000. The Company
believes the suit is without merit, however, to remain conservative, the entire
claim has been accrued in the financial statements.

NOTE 6. COMMON STOCK

The Company is authorized to issue 250,000,000 shares of common stock. As of
December 31, 2004, there remains issued and outstanding 57,508,112 shares of
such common stock which has a stated par value of $0.0001 per share.

During the three months ended December 31, 2004, $520,347 of convertible
promissory notes were converted into 5,203,470 shares of common stock at $0.10
per share and 10,406,940 warrants to purchase shares of common stock at an
exercise price of $0.30 per share;

NOTE 7. STOCK OPTION PLANS

The Company has adopted the 2004 Stock Option Plan which supercedes the 2003
Plan, and the 2000 Plan. Options outstanding under these plans as of December
31, 2004 are as follows:

|Plan Category | Number of Shares to
    be  | Weighted average    | Number of shares        
|------------- | --------------------------- | ------------------- | ------------------------
|              | issued upon
    exercise of | exercise price of   | available for
    future
|              | options                     | outstanding options | issuance                
|2000 PLAN     | 1,150,000                   | $0.10               | 0                       
|2003 PLAN     | 570,000                     | $0.63               | 0                       
|2004 PLAN     | 13,220,000                  | $0.16               | 10,780,000              

Subsequent to December 31, 2004 an additional 7,000,000 options were issued
under the 2004 Plan at an exercise price of $0.16 per share.

NOTE 8. WARRANTS

The Company has the following warrants outstanding to purchase common stock
at December 31, 2004:

8

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|Warrants issued in
    conjunction with financing costs whereby one   |           
|--------------------------------------------------------------------- | ----------
|warrant entitles the
    holder to purchase one share of common stock |           
|at an exercise price
    of $1.10, expiring December 19, 2005.        |           
|                                                                      | 670,275   
|Warrants issued in
    conjunction with financing costs whereby one   |           
|warrant entitles the
    holder to purchase one share of common stock |           
|at an exercise price
    of $0.65 expiring June 17, 2006.             | 75,524    
|                                                                      |           
|Warrants issued in
    return for financial advisory services whereby |           
|one warrant entitles
    the holder to purchase one share of common   |           
|stock at an exercise
    price of $0.05, expiring September 1, 2007.  |           
|This warrant can only
    be exercised after January 29, 2005.        | 3,000,000 
|                                                                      |           
|Warrants issued in
    conjunction with financing costs whereby one   |           
|warrant entitles the
    holder to purchase one share of common stock |           
|at an exercise price
    of $0.15, expiring September 1, 2007.        | 2,994,642 
|                                                                      |           
|Warrants issued in
    conjunction with financing costs whereby one   |           
|warrant entitles the
    holder to purchase one share of common stock |           
|at an exercise price
    of $0.30, expiring September 1, 2007.        | 2,287,669 
|                                                                      |           
|Warrants issued in
    conjunction with conversion of promissory      |           
|notes and in
    conjunction with the private placement completed     |           
|during July and
    September, 2004. One warrant entitles the holder  |           
|to purchase one share
    of common stock at an exercise price of     |           
|$0.30. Expiry dates:
    July 21, 2007 - 27,505,378; September 1,     |           
|2007 - 12,426,114;
    October 13, 2007 - 5,204,160.                  | 45,135,652
|                                                                      |           
|                                                                      | 54,163,762

NOTE 9. COMMITTMENTS

Effective December 1, 2004 the Company entered into an operating lease for
research equipment. Minimum annual lease payments total $10,932 commencing
December 1, 2004 and ending November 1, 2009.

9

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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
OF OPERATION

The following discussion and analysis should be read in conjunction with the
Financial Statements, including the Notes thereto, appearing in this Form
10-QSB. Except for the historical information contained herein the foregoing
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those projected
in the forward-looking statements discussed herein.

General

AlphaRx is a drug delivery company specializing in the development of
innovative therapeutic products for the pharmaceutical and consumer health care
market. Our core competence is in the development of novel drug formulations for
therapeutic molecules or compounds that have exhibited poor gastro intestinal
absorption due to poor solubility or have yet be administerable to the human
body with an acceptable delivery method. Our drug delivery system is versatile
and offers significant flexibility in the development of suitable dosage
formulations (i.e. oral, topical or parenteral) to meet the requirements of
specific drug molecules. Our primary activities since inception (August 7, 1997)
have been, in addition to research and development, establishing our offices and
research facilities, recruiting personnel, filing patent applications,
developing a business strategy and raising capital.

We launched Flexogan, a series of over-the-counter topical
analgesics, in Canada during August, 2003. We expect Flexogan to incur
significant marketing expenditures in 2005 in order to promote national sales
and gain market share in Canada.

We signed a licensing agreement with Andromaco Inc. in August, 2003 for the
commercialization of our lead pharmaceutical products "Indaflex" in Mexico. The
Company will receive royalties from product sales. Marketing approval from the
Mexican health authority was obtained during the first quarter of 2005. In order
to market and sell Indaflex products in the US and Canada, we will require
successful completion of human and clinical trials as well as FDA approval. We
expect these trials to commence in during our second fiscal quarter ending March
31, 2005.

We intend to continue investing in the further development of our drug
delivery technologies and to actively seek collaborators and licensees to
accelerate the development and commercialization of products incorporating our
drug delivery systems. Depending upon a variety of factors, including
collaborative arrangements, available personnel and financial resources, we will
conduct or fund clinical trials on such products and will undertake the
associated regulatory activities.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2004, AS
COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2003

The Company incurred a net loss of $444,434 for the three month period ended
December 31, 2004 as compared to a loss of $263,736 incurred for the same period
a year ago, an increase of $180,698 or approximately 69%. The increase stems
primarily from an increase in research and development activities related to
preparation for human and clinical trials of Indaflex.

Sales

Sales for the three months ended December 31, 2004 were $8,946 as compared to
$47,169 generated for the same period a year ago, a decrease of $38,223 or 81%.
The Company had marketing initiatives via radio, magazine and newspaper media
during the first quarter. The market for arthritic and muscle pain creams, which
Flexogan is addressing, is competitive, and additional marketing expenditures
will have to be incurred in order to increase brand awareness and subsequent
sales.

10

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Gross Margin

Cost of Sales for the three months ended December 31, 2004 was $4,428 as
compared to $17,516 incurred for the same period a year ago. Resulting Gross
Margin decreased to $4,518 or approximately 51% of sales as compared to Gross
Margin of $29,653 or approximately 63% of sales for the same period a year ago.
In order to be more competitive, the Company reduced selling prices during the
quarter - the primary reason for reduced gross margins measured as a percentage
of revenues.

Sales and Marketing, General and Administrative Expenses

Sales and Marketing, General and Administrative expenses consist primarily of
sales and marketing expenditures, personnel costs related to general management
functions, finance, inventory logistics, office overheads, as well as insurance
costs and professional fees related to legal, audit and tax matters. Sales and
Marketing, General and Administrative expenses for the three months ended
December 31, 2004 were $293,316 as compared to $270,917 incurred for the same
period a year ago, an increase of $22,399 or approximately 8%.

Approximately $148,000 or 51% of these expenses incurred for the three months
ended December 31, 2004 related to marketing of Flexogan in Canada as compared
to approximately $131,000 incurred for the same period a year ago. We expect to
continue with sales and marketing expenditures in order to establish brand
awareness, and increase sales.

The remainder of these expenses incurred for the three month
period ended December 31, 2004 related to legal expenses, professional fees, and
other office overheads. We expect that general and administrative expenses will
increase moderately over the near term.

Research and Development Expenses

Research and development expenses include costs for scientific personnel,
supplies, equipment, outsourced clinical and other research activities.

Research and development expenses for the three months ended December 31,
2004 were $154,012 as compared to $11,428 incurred for the same period a year
ago, an increase of $142,584. The increase relates to preparation of Indaflex
for human and clinical trials, and ongoing research and development of other
over the counter products. We expect to increase research and development
expenses over the remainder of 2005 as we accelerate the development and testing
of our Indaflex drug candidate.

Loss from Operations

Loss from operations were $454,260 for the three months ended December 31,
2004 as compared to a loss of $263,736 incurred for the same period a year ago,
an increase of $190,524 or approximately 72%. The increase of research and
development expenses of $142,584 was primarily the cause of the increased loss
from operations. Reductions in gross margins, and an increase in selling and
administrative expenses account for the remainder of the increased loss when
compared to the same period a year ago.

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2004 the Company had working capital of $2,236,089
compared to $2,183,913 as at September 30, 2004. The improvement of working
capital compared to periods prior to September 30, 2004 stems from the private
placement completed in late fiscal 2004 whereby shares were issued in exchange
for an investment of approximately four million dollars.

11

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During the three months ended December 31, 2004 we repaid or converted all
remaining debt such that we have no debt other than normal trade payables
related to ongoing business activities. We anticipate that our working capital
will be sufficient to fund ongoing activities beyond our fiscal year ending
September 30, 2005.

Since inception, we have financed operations principally from the sale of
Common Stock and issuance of promissory notes and expect to continue this
practice to fund our ongoing activities.

We currently do not have sufficient resources to complete the
commercialization of any of our proposed products or to carry out our entire
business strategy. Therefore, we will likely need to raise substantial
additional capital to fund our operations in the future. We cannot be certain
that any financing will be available when needed on acceptable terms or at all.
Any additional equity financings will be dilutive to our existing shareholders,
and debt financing, if available, may involve restrictive covenants on our
business.

We expect to continue to spend capital on:

1. research and development programs; 
2. preclinical studies and clinical trials; 
3. regulatory processes; and 
4. third party manufacturers and marketing partners to manufacture and market
our products for us.

The amount of capital we may need will depend on many factors, including:

1. the progress, timing and scope of our research and
development programs; 
2. the progress, timing and scope of our preclinical studies and clinical
trials; 
3. the time and cost necessary to obtain regulatory approvals; 
4. the time and cost necessary to establish sales and marketing capabilities or
to retain sales and marketing partners to market our products for us; 5. the
time and cost necessary to respond to technological and market developments; and
6. new collaborative, licensing and other commercial relationships that we may
establish.

The inability to raise capital would have a material adverse effect on the
Company. We currently have no capital commitments other than the payment of rent
on our facilities lease, and for certain research equipment.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

Certain of the information contained in this document constitutes
"forward-looking statements", including but not limited to those with respect to
the future revenues, our development strategy, involve known and unknown risks,
uncertainties, and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the risks and uncertainties associated with a
drug delivery company which has not successfully commercialized our first
product, including a history of net losses, unproven technology, lack of
manufacturing experience, current and potential competitors with significant
technical and marketing resources, need for future capital and dependence on
collaborative partners and on key personnel. Additionally, we are subject to the
risks and uncertainties associated with all drug delivery companies, including
compliance with government regulations and the possibility of patent
infringement litigation, as well as those factors disclosed in our documents
filed from time to time with the United States Securities and Exchange
Commission.

ITEM 3. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

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The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer has evaluated the effectiveness of
the Company's disclosure controls and procedures as of December 31, 2004. Based
on this evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective for gathering, analyzing and disclosing the information the Company is
required to disclose in the reports it files under the Securities Exchange Act
of 1934, within the time periods specified in the SEC's rules and forms.

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PART II: OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

Farhad Walji vs. AlphaRx, Inc. and AlphaRx Canada Limited filed in the
Supreme Court of British Columbia on August 23, 2002. Farhad Walji has filed a
claim asking for $25,000 plus interest for allegedly providing $20,000 pursuant
to a subscription agreement to purchase common shares of AlphaRx's stock and
damages resulting from lost opportunity. The Company has denied any liability in
this case and is currently defending this action vigorously. Nonetheless, the
value of the entire claim has been accrued in our financial statements as a
current liability.

ITEM 2 - CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES

During the three months ended December 31, 2004 we issued 5,203,470 shares of
common stock pursuant to the conversion of $520,347 in convertible debt. We also
issued warrants to purchase 10,406,940 shares of common stock at $0.30 per share
in connection with the conversion of debt.

As a result of the above transactions the Company had 57,508,112 shares of
Common Stock outstanding as at February 14, 2005. Additionally, there are
warrants outstanding to purchase 54,163,762 shares of Common Stock, ranging in
price from $0.05 to $1.10 and expiring between the period December 19, 2005 and
October 13, 2007.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 - OTHER INFORMATION

None.

ITEM 5 - EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS.

31.1 Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. 
31.2 Certification of C.F.O. Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002. 
32.1 Certification of Michael Lee pursuant to Section 1350 of Chapter 63 of
Title 18 United States Code. 
32.2 Certification of Marcel Urbanc pursuant to Section 1350 of Chapter 63 of
Title 18 United States Code.

(b) REPORTS ON FORM 8-K

On December 16, 2004 we issued a press release regarding the manufacture of
clinical materials for Indaflex clinical trials which are expected to commence
in early 2005.

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SIGNATURES:

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

DATED: February 11, 2005

ALPHARx, INC.By: __/S/ Michael M. LeeMichael M. Lee, Chief Executive
      Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant, in
the capacities, and on the dates, indicated.

DATED: Februray 11, 2005

Directors:/S/ Michael M. LeeMichael M. Lee, Director/S/ David MilroyDavid Milroy, Director/S/ Ford MooreFord Moore, Director


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